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Wharton Digital Press  |  May 8, 2019

“It’s Not Just About Geeky Math Stuff”

3 Customer Centricity Takeaways from Peter Fader and Sarah Toms’ Google Talk

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In January, Wharton School professor Peter Fader and Wharton Interactive executive director Sarah Toms gave a talk at Google’s headquarters about their new book, The Customer Centricity Playbook.

Customer centricity, the authors say, is not about being the best at customer service. It’s about recognizing the vast differences of our customers—in particular with respect to customer lifetime value (CLV)—and tuning our approaches to how we acquire, retain and develop them based on these differences. To become customer-centric requires seeing customers as individuals rather than as a monolith, which translates into us being smarter about how we invest in developing the highest valued customer base possible.

In the talk, Fader and Toms cover their Customer Centricity Manifesto, which includes all the elements that support customer centricity within an organization.

Here are three takeaways from the talk, gleaned from the authors’ main concepts and colorful examples.

1. Be creative to get other people in your organization to celebrate customer heterogeneity

Fader and Toms have stressed the importance of valuing customer heterogeneity over the concept of “the average customer.” Different customers are going to have very different customer lifetime values that don’t follow a traditional curve.

Fader told a story (around the 16-minute mark of the video) about giving a talk at a small business-to-business manufacturer in Virginia. He said that the company’s CEO told him he was disappointed that had gotten employees “jazzed up” about customer centricity after Fader’s talk, but they were still using terms like “the average customer” in conversations.

So the CEO put a fishbowl in the company lunchroom.

“I want all of you to listen. I want all of you to police each other. Anytime you hear a colleague refer to the customer in a singular manner … ‘the customer,’ ‘the average customer,’ you call them on it,” the CEO said, Fader recalled.

Calling them on it meant they had to put a dollar in the fishbowl. And in no time, the fishbowl filled up. At the end of the quarter, they had enough money to have a party.

What did they celebrate? Customer heterogeneity.

“It’s not just about geeky math stuff,” Fader said. “It’s about figuring out how to get that message across.”

2. Don’t try to isolate customer centricity

Sarah Toms

Toms said that when she and Fader set out to write The Customer Centricity Playbook, they didn’t want it to be something that would just live in the “marketing silo.” That’s why they encourage cross-functional uses of customer lifetime value (CLV) over siloed applications.

That means divisions of a company should come together on customer centricity—from working with tech and IT teams to bringing in people from the finance department.

Toms told the story of Batteries Plus Bulbs (around the 18-minute mark in the video), a retail chain that sells and recycles batteries of all different sizes. They have realized that higher-value customers want to be engaged with differently than lower-value customers.

“They started small. They started experimental. And it’s now grown into being a cross-functional experience for them—when they think about their business, when they think about their customers and how they engage with their customers in different ways, based on CLV,” Toms said.

So when they have customers come to them through their website, through call centers, or through retail, they have ways of capturing that behavioral data—for example, using Natural Language API. They know which customers are going to behave a certain way and, therefore, are more likely to have higher value.

In doing so, they’ve created CLV lists for their Salesforce. They go after the targets and cycle back the performance of those lists to different areas of the company to improve on their algorithms.

“It’s a nice, iterative process, where they’re really leveraging CLV,” Toms said.

For Batteries Plus Bulbs, CLV serves as a key indicator not only for which customers to target, but also for which stores they may want to acquire. In 2018, they announced plans for a 50-store expansion.

3. Companies should offer more to their highest-value customers

Pete Fader

If you approach customer retention and development in a customer-centric way, the authors say, you can have a better idea of what kind of tactical approaches to take with which customers.

One approach Fader highlighted is for companies trying to go on offense with high-value customers: premium offerings.

Don’t give them a buy-nine, get-one-free deal, Fader said. These are the people who, for whatever reason, identify very strongly with you. They’re going to “go through the gates of hell” to stay with you and, in certain cases, they’re willing to pay more for something more.

A premier example of premium offerings, Fader said, is LinkedIn Premium. Fader asked the audience who was a LinkedIn Premium subscriber, and only a small number of hands went up.

“This is my point,” he said. “It is a premium service. It is not for everybody. But for those one or two people who put their hands up, LinkedIn means a great deal to you.”

There are a lot of companies that Fader says have been too shy in trying this type of offering. He mentioned one that the leader of the free world uses every day: Twitter.

“Don’t you think our president would pay a premium to be able to edit his tweets after initially posting them?” Fader said. “I’m just saying!”

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